Whatever targets a radio-like experience in mobile platforms (especially cars) and is advertising-supported is a significant challenge to ALL radio, not just the folks from Pandora.

Especially if it flips a switch and on day one and has distribution across numerous widespread platforms the world over.

After all, it has taken Pandora years to approach a degree of distribution that allows it to compete against radio. Apple could achieve this level of distribution overnight.

So let’s follow the money, shall we?

Bloomberg writes:

Apple’s negotiations with record labels have centered around advertising, the people said. In addition to an upfront fee, record companies are seeking a percentage of ad sales and the ability to insert their own commercials for artists, they said. Apple sees the service as a way to grow its iAd mobile advertising platform, and is exploring ways to integrate iAd with iTunes to steer customers back to iTunes.

In other words, the labels want a piece of the ad pie, thus the labels are both your partners and your competitors. The labels would have a stake in both content and distribution.

I have long argued that as long as the original market for the labels – consumers – refuses to ante up, labels will have to get their money from whoever has pockets deep enough and incentives strong enough: Hello, advertisers! Wouldn’t it be great to get high fees from radio broadcasters AND their clients? You bet it would be!

A deal on ad revenue is expected by mid-November.

“Apple needs to own the out-of-home experience,” says the analyst interviewed in the video below.

The “out-of-home” experience? Gee, who owns that now? It ain’t Pandora, folks.

Also from the interview:

The download-to-own model is really shifting…and a radio product…would make a tremendous amount of sense….If [Apple] wants to drive distribution of an iRadio app in early 2013, they can make it ubiquitous across all of their devices.

Check out the whole interview here (if you can’t see the video, click the post title):

In concept that would be a dynamite pair. But I’m not so sure Amazon needs Pandora to create Pandora. And Amazon, like Apple, would prefer to forge direct deals with the labels rather than live with the deals every other Internet radio outlet suffers under.